First Mariner Bancorp reports quarterly profit

First Mariner Bancorp reported Wednesday its first quarterly profit in five years, a sign of progress for the Baltimore institution struggling to raise capital and avoid a federal takeover.

The company earned $1.8 million for the first three months of 2012, boosted by a recovering economy and steadier housing market. In contrast, First Mariner had a loss of $7.3 million for the same period last year.

On a per-share basis, the company earned 10 cents, compared with a loss of 40 cents.

The parent of 1st Mariner Bank recorded its last quarterly profit in the January-to-March period of 2007, when it earned $100,000.

First Mariner shares, which trade over the counter, gained about 7 cents to close at 47 cents each on Wednesday.

The company, whose founder, Edwin F. Hale Sr., stepped down late last year, has been under order from federal bank regulators to raise capital since September 2009. It struck a deal last year to get a much-needed $36.4 million cash infusion from a New York private equity firm, provided it can first raise $123.6 million more from other investors.

The bank has remained mum on whether it has raised any of that money.

Stuart Greenberg, a banking consultant in Baltimore, said investors should not read too much into one profitable quarter. Questions remain about the bank's operations, including whether the equity deal will be completed, Greenberg said.

"If they don't do it, can the bank survive on its own?" he said. "It's highly questionable, in my mind."

Either the bank or Priam Capital can terminate the agreement at any time for any reason, according to regulatory documents, and so far neither has done so. The bank cautioned that "it is uncertain whether the company will able to satisfy all the conditions of the agreement and complete the transaction with Priam," according to documents.

While the bank's operations improved in the first quarter, its capital levels are still far below levels required by federal regulators. The bank was deemed "significantly undercapitalized" at the end of last year, which is one step removed from a federal takeover, according to regulatory filings.

Interim Chief Executive Officer Mark A. Keidel said in a statement that the company remains committed to improving its capital levels and its officials "are working diligently to satisfy the requirement of our regulatory agreements."

The bank saw strong activity in mortgage lending and refinancing, the company said.

Non-interest income totaled $10.4 million in the quarter, up from $3.1 million last year. The company said a bulk of the increase was due to the high volume of refinancing and sales activity from its mortgage division.

Gross revenue from mortgage banking activities was $9 million in the first three months of the year, compared with $935,000 in the same period last year.

Its net interest income also rose to $7.6 million in the quarter, from $6.8 million a year earlier.

Keidel said economic conditions are improving while the housing market appeared to have stabilized.

As a result, more of the bank's customers are keeping up with loan payments and it has been able to resolve more of its problem loans, Keidel said.

Its nonperforming assets, which include debts that are not being paid and foreclosed real estate, fell to $62.5 million as of March 31, down from $71 million a year earlier. Costs related to those bad assets dropped to $2.3 million from $2.6 million.

The company's total assets fell 7 percent to $1.18 billion at the end of the quarter, from $1.27 billion a year earlier.